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GALLATIN TO A. C. FLAGG. - Albert Gallatin, The Writings of Albert Gallatin, vol. 2 [1879]

Edition used:

The Writings of Albert Gallatin, ed. Henry Adams (Philadelphia: J.B. Lippincott, 1879). 3 vols.

Part of: The Writings of Albert Gallatin, 3 vols.

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Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


GALLATIN TO A. C. FLAGG.

New York, December 31, 1841.

Dear Sir,—

In my letter of the 24th I announced my intention of adding some further observations on the subject-matter of my last essay on banks and currency. These, however, will be little more than a recapitulation of that portion of the essay which relates to the double banking system of this State.

In order that I may not be misunderstood, some preliminary explanations may be proper.

I use the term banking in that sense in which it is universally understood in the United States; that is to say, as implying the permission to issue a paper currency.

By free banking, in its genuine sense, I understand the extension of that permission to all persons or associations of persons, free of all restraints, but on his or their personal responsibility.

It is only as regards the permission to issue a paper currency that I think restrictions to be necessary. In every other respect there is no more reason for laying restrictions on banking operations than on any other species of business; at least when the parties are personally responsible.

It appears to me unnecessary at this time to discuss the question whether the best ultimate plan would not be the adoption of a true free banking system as I have defined it.

Such is, indeed, the system which has prevailed for more than a century in Great Britain. I am nevertheless of opinion that it cannot be practically or usefully applied to the United States. I believe that, with our present inveterate habits on the subject of bank-notes, the poor and the ignorant would be incapable of judging between sound and bad paper, that they would be exposed to perpetual impositions and losses, and that it is one of the cases in which, for their protection, legislative interference is legitimate and necessary. This, however, is matter of opinion. If the people are in favor of the experiment, let it be tried. I will only observe that the profits of honest banking by the existing banks or banking associations are so small, when compared with those generally realized by men in active business, that I do not believe that honest and responsible capitalists could be substituted for the existing banks. It would, at all events, be necessary to enable them to lend their money at its market price, and for that purpose to repeal the usury laws to the same extent as in Great Britain; that is to say, in reference to bills of exchange and negotiable or mercantile paper payable to bearer or to order.

For the present, taking things as they now are, I have confined my observations to the remedies which may be applied to the evils growing out of the existence of irresponsible banks or banking associations.

It is not necessary to inquire whether the banks created under what is called the free banking law are technically corporations, or are according to the provisions of the Constitution to be considered as such. It is sufficient to observe that, in point of fact, they have not only all the privileges necessary to enable them to make contracts, to institute suits, and generally to carry on all their operations in their joint name and character, in the same manner as private persons, or as if they were technically incorporated; but that they are also, in common with specially chartered banks, exonerated from all personal responsibility.

The two prominent defects of the existing law, and which must strike every one on the first view of the subject, are, first, the inconsistency of having two different systems in operation at the same time for equally irresponsible joint stock companies, between which there is no other difference than that some were originally created by special laws, and the other by virtue of a general law; secondly, that, having exonerated all the parties concerned, either as stockholders or as officers, in the new joint stock companies from any personal responsibility, no other efficient guarantee should have been required from them as a substitute for that responsibility.

On the first point it would seem that there could be no difference of opinion. Restraints are either necessary or useless. If necessary, they should be equally applied to all; if useless, they should be repealed in reference to all the banking institutions. By assimilating the chartered banks and the new banking associations, there will be no use or pretence for special laws on that subject. After having determined on the conditions and restraints which may be deemed efficient and essential, nothing more will be necessary than a legislative provision which will enable the chartered banks to come at once under the general law without being obliged to undergo the process of dissolution and of a new reorganization. The second point appears to be the only one which requires more minute investigation.

If we have the example of Great Britain in proof of the practicability of a system of true responsible free banking, we had none whatever of a general permission to issue paper currency without either personal responsibility or some conditions and restraints substituting another sufficient guarantee in lieu of personal responsibility. It must ever be remembered that the exoneration from such responsibility is by far the most important and most dangerous privilege bestowed upon the old and new banks, and that no reason can be alleged why that privilege should be allowed, without a satisfactory guarantee, to the issuers of a paper currency rather than to any other class of merchants or dealers.

The conditions or restraints which had heretofore been deemed necessary, referred either to the objects for which the banks were created, to the guarantee substituted in lieu of personal responsibility, or to the event of banks becoming insolvent or suspending their payments.

With respect to the objects of the banking institutions, dear-bought experience must have taught the absolute necessity of defining with precision the species of business which the banks might lawfully carry on, and of expressly excluding such as they might naturally be tempted to connect with their legitimate operations. It is notorious that, independent of the fraudulent institutions to which the general law gave rise, there is hardly one which has not been induced, compelled, or invited to deal more or less in public stocks, and which has not been injured by it. Examples might be quoted where the law was, contrary to the intention of the Legislature, used for the sole purpose of creating associations of irresponsible stock-jobbers. It has already been found necessary by an amendatory Act to prohibit the issue of post-notes or of notes bearing interest. It appears equally essential to prohibit the dealing in stock of any description on the part of those institutions. The example of a neighboring State has clearly proved the danger, both to the State and to the banks, of resorting to them, even for the purpose of supplying temporary wants, but still more so when the object is to sustain by artificial means the credit of the State and the market price of its stocks.

It cannot be necessary at this time to bring additional arguments for the purpose of showing the necessity of an absolute prohibition to deal in any stocks foreign to the State.

The guarantee substituted for personal responsibility, which had always been required from the chartered banks, was the actual payment in specie of a capital fixed by law. The omission of a similar provision is the fundamental error of the existing free banking law. It appears essential that those provisions to which the chartered banks were subject, and which relate to the duration of the bank, to the amount of capital, and to its actual payment in specie and only in specie, should be applied to the new joint stock companies.

For the same reason it appears equally proper that the preventive restraints intended to preserve the capital should apply to all the banking associations. The reasons why the limitation of the amount of the loans and discounts of a bank may alone be sufficient for the purpose intended, and why that amount should not exceed fifty to sixty per cent. beyond the amount of the capital of the bank, have been given in the essay, to which I beg also leave to refer you as regards some other suggestions of a similar character, but of less importance. A prohibition to make dividends beyond a certain rate might prove advantageous, but would not alone prevent a dangerous increase of loans and discounts.

The paramount utility of the general law, by which it was enacted that any incorporated company insolvent or having suspended its payment for one year should be deemed to have surrendered all its rights and privileges and should be adjudged to be dissolved, has been sufficiently tested by experience, and no doubt is entertained that it ought to be expressly applied to all joint stock banking associations.

I had at an early date suggested to you, and have since tried to show, the propriety of arresting at once the circulation of the notes of any suspended bank from the moment when it suspends its specie payments to the time when it may resume them.

It will be generally admitted that if, on account of their irresponsibility, chartered banks and other banking associations must be permitted to carry on their operations only upon certain conditions and under certain restraints defined by an equal and general law, any restriction either unnecessary, purely nominal, or which cannot be carried into effect is dangerous, has a tendency to deceive the public by the appearance of a fallacious guarantee, and should therefore be avoided or repealed. It cannot be denied that the application to the new joint stock companies of those conditions which are proper with respect to the old banks is just and necessary. And I think that I am fully warranted in saying that the utility and practicability of those few and simple conditions, now applicable to the chartered banks (which I wish to be preserved and applied to all banking associations), has been satisfactorily approved by experience. A few solitary exceptions will happen under the operation of any law whatever, and afford no argument against the general utility of the law.

Independent of some less important regulations or restraints which might be dispensed with, I have pointed out, as appearing to me either improper in themselves or affording only a false security, the three following:

First, any attempt whatever to regulate exchange, to compel banks to redeem their notes at par or at a certain discount at any other place than that specified on the face of the notes, or in any way to give a uniform value in different places to banknotes, which are in their nature a local currency. All such attempts appear to me to have been made under the erroneous belief that a paper currency can do that which gold and silver, of which it is the representative, cannot perform.

Secondly, any provision which makes a well-conducted bank responsible for the acts and misdeeds of another bank, over which it cannot possibly have any control.

Thirdly, the obligation on the part of a bank or banking association to deposit in the hands of a public officer either mortgages or stocks, for the purpose of securing the ultimate payment of its notes or other liabilities. Although this last mode affords no remedy against the losses always incident to a suspension of specie payments even when the notes are ultimately redeemed, it may, if properly modified, give some security for that ultimate redemption, and is much less exceptionable than the obligation imposed on every chartered bank to be responsible for the misconduct of the others to an amount not exceeding an annual payment of one-half per cent. on its capital. Although it may be with propriety alleged that the banks did voluntarily accept their charters with that condition annexed, the obligation is nevertheless unjust in itself; it is also injurious to the public, in as far as it gives to some banks an artificial credit beyond that to which they may be justly entitled; and it appears to me that in this, as in all other cases, the law ought to be the same for every species of irresponsible bank or banking association.

Permit me to advert here to the extraordinary difference in the public opinion on the subject of banks between this State and other parts of the Union.

The banks, with a few insulated exceptions, have, in all the States south and west of New York, suspended specie payments for more than two years; a state of things which could not have continued to exist so long had it not been prolonged by successive legislative enactments, and therefore been sustained by public opinion.

On the other hand, although the banks of New York can claim no other merit than that of having performed their duty, yet it was an arduous one. It was, in the first instance, performed by them alone, and in the face of a strong opposition; and it cannot be denied that it is in a great degree to their conduct at and since that time that the country is indebted for a speedy resumption and for the maintenance of a sound paper currency in this State and in the eastern portion of the Union. Even now the task of maintaining that currency rests almost exclusively on them. This city is the centre of all the great moneyed operations of the country; whenever foreign exchanges are unfavorable, the consequent exportation of specie is principally from New York, and immediately affects the city banks. It can hardly be doubted that a suspension of specie payments on their part would instantaneously cause a similar result wherever those payments are still maintained.

The fact to which I call your attention is that, whilst the banks in other States, which have persisted in a continued violation of their engagements, have been and continue to be specially favored, those of this city have been more vehemently attacked and appear to be more unpopular than anywhere else. That the warfare was carried on against the system generally and was not personal may be admitted. But the fact is not less true that, taking the country at large, those banks have been treated with most indulgence which least deserved it. I do not wish for the slightest relaxation in favor of those of this city and State if they should fail to perform their engagements. But I may ask for strict justice as well towards them as on their part; that they should not continue to be charged with a monopoly which no longer exists; that they should not be subject to unequal and unjust taxation; and that their profits, which, when they confine themselves to their lawful operations, are perfectly honest and legitimate, should not be represented as founded in fraud and deception.

I cannot close this letter without adverting to a subject of still greater and more immediate importance than that of the currency.

The aggregate amount of the State debts, to which you were the first to call the public attention, and its fatal consequences, are truly alarming. It is difficult to find an apology for those who have used, or rather abused, the credit of the States for banking purposes. It would be unjust and uncharitable to be too severe towards those who have promoted premature or unprofitable internal improvements and have fearlessly contemplated an indefinite increase of public debt, to be provided for by the revenue that might be derived from those works, or by the growing resources of the country. Nor can the charge be made exclusively against either of the political parties. In truth, it is only one, though probably the most fatal, branch of that universal overtrading, of that delusion from which few have escaped, and which has led into greater errors men of sanguine temper and vivid imagination.

The consequences are worse than had been anticipated by the most sober and cautious observers. The catastrophe of the United States Bank, the almost general suspension of specie payments, the continued system in Pennsylvania and elsewhere to borrow annually the amount necessary to pay the interest on the public debt, the inability on the part of some States to pay that interest, and, more fatal than all the rest, the unjust and dishonest attempt or threat, under unfounded and frivolous pretences, to repudiate the debt itself, have destroyed confidence to an extent heretofore unknown. There is at this moment what may be properly called a general panic. It exists in reference to every species of American stocks in Europe as well as here. The most inconsiderable amount of any species, without excepting those of the State of New York, thrown in the market is sufficient at once to sink its price. The reaction is perhaps still more exaggerated than the former anticipations of speculators had been.

Those apprehensions are certainly erroneous, so far at least as relates to this State. Its resources are entire and untouched. Its great improvement, the Erie Canal, is highly productive, instead of being a charge on the public. The principal of the State debt compared with its population is at the rate of less than nine dollars a head (whilst it amounts to twenty-two dollars in Pennsylvania), and a State direct tax of 2½ mills (¼ per cent.) would, exclusive of other existing resources, pay the interest and in a few years discharge the principal.

Yet you may rely upon it that confidence will never be restored till the State ceases to borrow for itself or to lend its credit to others; nor indeed, as I believe, so long as it does not stop all its expenditures for internal improvements beyond the amount of its annual revenue. This may seem harsh doctrine, only because of late a different course has been pursued. No maxim is more certain than that a nation never ought to contract a debt in ordinary times, I would almost say, whilst at peace, and that at all other times it must provide by taxes for its annual expenditures. With the single exception of the debt incurred for the purchase of Louisiana, this had ever been done by the government of the United States from its organization, or at least from the year 1796, until, under some misapprehension of the amount of actual revenue, 28 millions were taken from the Treasury and distributed amongst the States; whilst at the same time the miserable Seminole war gave rise to an enormous unexpected expense. Even England, whose public debt is so frightful, has never increased, but, on the contrary, lessened it during every period of peace since the revolution of 1688 to this day.

If this maxim should hereafter be rigidly adhered to, we have nothing but a temporary embarrassment to encounter. It may be that on account of existing contracts, or of some portion of the public works which it is absolutely necessary to complete, the State will be compelled still to borrow something this year. This will be an evil, which should be reduced to the smallest possible amount. It cannot be effected without a loss. Forced loans, in imitation of Pennsylvania, will not be thought of. The credit cannot be restored and the price of the stocks be raised till there is a guarantee that the amount will not be further increased.

As an apology for expressing myself in strong terms on that subject, I pray you to recollect that I have at all times tried to inculcate those principles, that I have always acted in conformity with them, and that the eighteen best years of my life were almost exclusively employed in successfully carrying them into effect.

GALLATIN TO CALEB CUSHING, M.C.

New York, January 7, 1842.

Dear Sir,—

I will now try, in compliance with your request, to state my objections to the plan for a fiscal agency proposed by the Secretary of the Treasury. They apply to the issue by government of the intended paper currency, and to its dealing in exchanges otherwise than for its own express wants and purposes.

It is necessary in the first place to recollect the essential points of difference which distinguish such paper currency as is now contemplated from the Treasury notes heretofore issued by government, and which are precisely of the same character with the English exchequer bills.

These Treasury notes may indeed, under existing circumstances, be advantageously substituted for currency, for the special purpose of paying taxes and other debts due to the United States; but they never can become a part of the general currency. Being payable at a future day, and bearing interest, their market price fluctuates like that of other stocks; and they are sold and paid for, in the ordinary currency, in the same manner as any other commodity.

Inasmuch as these notes are issued regularly and gradually, and made payable on fixed days (generally one year after date respectively), government is always apprised one year in advance of the precise sum it has to pay, and may accordingly always provide for a punctual payment. But government never can ascertain what amount of a paper currency payable on demand it may be called on to pay at any time whatever. It is in that respect as much exposed as other banks of issue to the fluctuations in the demand for specie, and to all the contingencies of general overtrading, unfavorable foreign exchanges, and panic.

This last consideration points out the first great danger of an issue by government of a paper currency payable on demand, and for the payment of which in gold or silver, to its full amount, and at any time, it stands pledged. It is the same danger to which all our banks are perpetually exposed: an involuntary inability, even in time of peace, to maintain specie payments. It is obvious that such a suspension by government would be attended with still more fatal consequences than a similar suspension by ordinary banks. It would almost necessarily induce and sanction a general suspension by those institutions; it would inflict a deep injury on the credit of the federal government; and its deleterious effect on the moral feeling of the community cannot be overrated.

The proposed issue of a stock of the United States to the amount of five millions would not afford a sufficient guarantee, even for the ultimate redemption of an issue in paper money of fifteen millions. But this contingent power to borrow money, which should always be avoided if possible, cannot prevent a temporary suspension, unless we suppose sufficient sagacity on the part of the board of control to have foreseen in time the impending crisis. It is precisely the want of that sagacity which constitutes the danger; and there is no reason to suppose that the intended board of control will, in that respect, be more highly gifted than the practical men of business who direct our banks.

Supposing, however, the new exchequer to be administered in the best possible manner, and that it should, under the proposed limitation in the amount of issues, maintain specie payments in time of peace, this would not remove the principal danger which forever attends the issue of any species of paper money by a government.

There is always in time of war, or indeed of any extraordinary pressure, the strongest temptation on the part of any government to resort to that most easy resource, a gradual but indefinite increase in the amount of that paper. We must now be satisfied by our own experience that the original promise to redeem at all times the currency on demand in gold or silver affords no guarantee against its being converted into irredeemable and depreciated paper money. There may be, but I do not recollect any instance of any paper currency issued by any government, and, once depreciated, having been redeemed at par by it. Of the reverse we have abundant proofs both abroad and at home.

The novelty of the experiment, and at this time, is another strong objection. In calling this a new experiment, I mean to say that, with a single exception abroad and some disastrous of a late date by members of the Union, no government has, within my knowledge, ever attempted to issue on its own responsibility a paper currency redeemable on demand. The suspension of specie payments by all the State banks, which were only subordinate departments of the treasury of the State, will not be quoted in support of that system.

The exception to which I allude is that of Prussia, which has within a few years put in circulation a paper currency of that description. However successful the experiment may as yet have proved, we must wait till that government has passed through the ordeal of war, or of some other equally disturbing cause, before we can draw any legitimate inference from the attempt.

England is certainly the country in which, notwithstanding a suspension of twenty years by the banks of issue, the system of a paper currency has been most extensively and successfully carried into effect. But the government of that country has always taken special care that that currency should be issued by corporations or individuals; that no responsibility should in that respect attach to government; and that its credit should not be affected by a failure on the part of those who issued the paper to perform their engagements.

I feel satisfied that the issue of a paper such as is proposed would inflict a permanent injury on the credit of the government of the United States. It appears to me equally certain that it would be most injudicious at this time of real difficulty, of alarm and panic, when confidence in the fidelity or ability of some of the States is impaired, and the effect is felt by all the other members of the Union and by the general government.

It seems to me that a power given to the proposed exchequer to deal in exchange for any other purpose than for that of transmitting or obtaining funds where they are wanted by government, though perhaps not threatening such extensively fatal consequences as that of issuing the intended paper currency, is in other respects equally, if not more, objectionable.

In the first place, I would ask whence the power is derived. I have believed, contrary to the opinion of many respected friends, that the power of the government of the United States to select its own agent for transacting its own business did, in the present general use of banks for all fiscal purposes by the States and by individuals, imply the power to incorporate a bank of its own. But I cannot perceive from which power vested in the general government that of government to deal in exchange for the benefit of individuals is derived.

The power of regulating the rate of exchanges is not implied in that of regulating commerce. At least no trace of any attempt for that purpose is to be found either in the commercial code or in the treaties of commerce of any country. But even supposing that Congress was authorized to regulate in that respect the dealings of individuals, neither this nor any of the powers specially vested in the general government does directly or indirectly imply that of converting itself into a trading company. It may be observed in connection with that branch of the plan that it authorizes the dealing in exchanges on time for the benefit of individuals, which, however limited, is thus far an authority to discount.

Independent of the undignified position in which a government places itself when attempting to compete with individuals in any commercial pursuit, and of the pecuniary losses which must almost necessarily ensue, the danger, or at least the suspicion, of favoritism, if not of corruption, cannot be avoided. It is a matter of regret that we need not resort to foreign precedents for proofs of the reality of that danger.

That some institutions of that kind, such as the State Bank of South Carolina, have been skilfully and honestly conducted, is true. But, amongst others, it is only necessary to advert to the fate of the State Bank of Alabama, which has lost one-half of its capital, and the directors of which, appointed by the Legislature, have been exposed to charges not only of gross mismanagement, but, though perhaps unjustly, to other of a more grave character. The recommendation of the late Governor, to transfer the appointment from the Legislature to the Executive, is alone a conclusive argument against any attempt to establish a bank on account of government.

Without even discussing the arguments adduced in support of the plan suggested by the Secretary of the Treasury, it appears to me that all the benefits, in reference either to currency or to exchanges, which, in his view of the subject, may be derived from it, are greatly outweighed by the dangers attending any system founded on that principle, and which I have attempted to point out.

On the subject of currency, I will only say that I cannot perceive how a currency equal in value to specie can displace one that is depreciated, so long as this is tolerated by the several States; nor how it can, in any respect, induce or compel a return to specie payments. It is true that this observation, if correct, would apply equally to the notes of a bank of the United States, founded on the capital of individual subscribers.

The report of the Secretary of the Treasury is not only a well-written and imposing paper, but, whether considered as an attempt to reconcile opinions perhaps irreconcilable, or viewed as an argument on one side of the question, it does great credit to the author. The most vulnerable part of it appears to me to be that which relates to exchanges.

The rates of exchange have always been regulated by the natural laws of trade, and require no other regulation. The difference in the nominal exchange between two countries or districts which is due to the depreciation of the local currency of one of them is not at all a difference of exchange, but a difference of currency. It is only because the currency is of the same denomination in both districts that, in common parlance, exchange and currency are confounded. There is no other remedy in that case but a return to specie payments.

But the true rates of exchange, that is to say, the rate at which specie, or funds equal to specie, may be transferred from one country or district to another, are necessarily governed by the relative amount of supply and demand. If a country becomes greatly indebted to another and has neither products nor specie to pay its debt, the rate of exchange may rise even above the expense and risk incident to the transportation of specie. The competition between bankers reduces it to the lowest possible amount. A banking corporation, with a very large capital and branches disseminated throughout the country, may increase the competition and be able to afford the requisite facilities on cheaper terms than private bankers. But government has no other legitimate resources for the same purpose than that portion of the balance in the Treasury which accumulated in one or more places is not immediately wanted by it in any other quarter. The necessary transfer of public moneys from the places where they are not wanted to those places where they must be expended may occasionally assist in restoring the equilibrium. But this has been and must always be done by the Treasury, without regard to the effect it may produce, and is wholly distinct from the sale or purchase of bills of exchange for other purposes than that of transmitting the public funds to the places where they are wanted.

The amount in the Treasury, beyond the immediate or proximate wants of government, will generally be too small to produce any sensible effect; at present it is a negative quantity. If government should purchase exchange beyond that amount, it must be by a dangerous additional issue of notes, payable on demand at a place where they have not sufficient funds.

But there is no necessity for such an interference on the part of government. The use of bills of exchange is coeval with the existence of commerce between different countries. That commerce between the different parts of Europe has been prodigiously increased within the last hundred years; and the exchanges from Leghorn to London, from Cadiz to St. Petersburg, and through all the intermediate places, have been and continue to be effected with perfect convenience and facility without the slightest interference on the part of governments, and, I may add, without the establishment of a bank of Europe.

With respect to the part of the plan which relates to the safe-keeping of public moneys, as these must necessarily be collected and ultimately disbursed by the officers of government, the question is only in reference to moneys in transitu, that is to say, which remain in the Treasury between the time of collection and that of disbursement. This resolves itself into the question whether they are safer in the hands of officers selected by government, or when secured by the capital of the banks in which they may be deposited. It has been decided in favor of the banks by all the States, partly on account of the great inconvenience of resorting to any other but the general local currency. To this the general government cannot resort universally without violating that clause of the Constitution which prescribes uniformity in the collection of imposts and other taxes.

The plan proposed is an improvement of the sub-treasury, in as far as it permits the use of the currency issued by specie-paying banks. It increases unnecessarily the number of officers beyond the number wanted for the special purpose of safe-keeping. The board of control, and most of the additional officers, may be dispensed with if the fiscal agency does not deal in bills of exchange for individual purposes. The plan does not give the security resulting from the capital of State banks; it affords no other guarantee, in reference to the public moneys, than the fidelity of the officers appointed by government.

The only apparent advantage that I can perceive is the active employment of the actual balance in the Treasury. The true remedy consists in reducing that balance to the smallest possible amount. This is generally the natural result of the operations of most governments. England always owes a much larger amount to the Bank of England than this owes to government, although the bank is always intrusted with the amount necessary to pay the interest on the public debt. The prospect of the revenue and expenditure, as contemplated in the reports of the Treasury and of the other Departments, do not induce an apprehension of any great danger of an extraordinary accumulation in the Treasury.

Even in case of such a temporary accumulation, highly inconvenient as it must necessarily be, I think it would be safer and more consistent with the permanent interests of the community to have the money locked up rather than that it should be used by the banks and produce an unnatural expansion and that overtrading which is invariably followed by curtailment and distress. Might it not be better to use specie-paying banks only as depositories for safety and as disbursing agents, on the express condition that the public moneys should be considered as a special deposit not to be used for discounts, and to pay them a reasonable commission for their labor and risk?

I can really see no other reason for the plan proposed than the wish to be doing something on the subject of the currency. Some imprudent commitments may have taken place; expectations may have been inconsiderately raised. But can anything efficient in reality be accomplished? Without adverting either to the danger of an attempt to cure the evils of paper money by issuing more paper, and, in order that a bank of the United States may check the excessive issues of State banks, of allowing it a capital commensurate with the object, or to the general unpopularity, increased by late events, of such a bank, it is sufficient that at this time the establishment of a bank founded on individual subscriptions is impracticable. I am sure that this cannot and ought not to be attempted unless a great change should take place both in public opinion and in the money market. My own opinion respecting the most efficient remedy by Congress to the disordered state of the currency has already been publicly given. You know that it consists in the application of the bankrupt law to banking corporations or associations.

You suggested that anything I might write on the subject would, if I desired it, be deemed confidential. There is nothing in this letter that may not be freely communicated; and you are at liberty to use it as you may think proper.

I have, &c.

P.S.—You would confer a favor on me by sending me, if you can do it conveniently, the documents at large accompanying the annual reports of the several heads of Department, the estimates of appropriations for this year, and the annual statement of the commerce and navigation of the United States. I feel much less interest in the proposed fiscal agency than in the actual fiscal situation of the country, and in the measures which may be adopted equalizing after this year the receipts and expenditures and for meeting the deficiency of this year. You have in both respects more than ordinary difficulties to encounter.